Dear Editor
Dear Editor Deficits After reading Professor Elliot Zupnick's article ("Getting the Red Out," NL, February 20), I still do not know why he thinks deficits matter. Professor Zup-nick...
...the third—an excess of savings—does not...
...The fact that the United States has recently suffered from a severe peacetime inflation has had a profound, almost traumatic, effect...
...At least for the foreseeable future, inflationary expectations will remain an important feature of the economy...
...I am perplexed and would be grateful for some further explanation from Professor Zupnick, as well as some indication as to how he would like to see the tax base broadened...
...But so long as there is unutilized capacity and significant unemployment, why should business want to call upon increased savings to expand capacity...
...Boston Leopold Reisler...
...To begin with, there is the matter of one's mother being betrayed...
...Under these circumstances, it is inconceivable that the present level of deficits can be monetar-ized without once again triggering the inflationary mechanism...
...When these conditions do not prevail, however, an increase in the value of goods and services absorbed by the government through deficits must be offset by a corresponding decline in other sectors...
...I would like to suggest to Sauvage that even those of us who are members of the "liberated" generation would probably have Biffs reaction...
...An example is his review of the new production of Arthur Miller's Death of a Salesman ("On Stage," NL, April 16...
...But he finds Miller guilty of an "emphasis on a kind of Victorianism that was probably outdated already in 1949...
...Despite the severity of the depression as evidenced by the high rate of unemployment and unutilized capacity, few economists believe this is possible...
...And if there is a shortage of "loanable funds" that crowds out private capital formulation, why would monetizing the debt—to the extent necessary to finance capital expansion—be inflationary if it resulted in an increase of civilian goods and services...
...Thus deficits of the present magnitude can be considered benign, or even beneficial, only if their monetarization would not lead to a recurrence of inflationary pressures...
...It is not uncommon for him to begin one of his "On Stage" columns by declaring that a play is highly enjoyable, and then to go on and devote the rest of the discussion to its flaws...
...Professor Zup-nick writes: "During periods of broad unemployment, unutilized capacity and excess of savings, the goods and services a deficit permits a government to command are newly created, augmenting the total demand...
...Do we not need to stimulate demand even more...
...My difficulty with this explanation is that two of the conditions set forth by Professor Zupnick—broad unemployment and unutilized capacity—do prevail...
...Criticism How unfortunate that Leo Sauvage, who has much to tell us about the theater, seems to believe that writing criticism means always being critical...
...On the whole Sauvage's approving comments are incisive, in places courageous...
...Sauvage insists that "for all except the most puritanical" this can hardly be seen as a serious blow...
...How else can we explain the fact that at present real interest rates are at an historic high...
...The reference is to the devastation experienced by Biff, Willy Loman's college-aged son, when he finds his father in a hotel room with a strange woman...
...Nor is catching the revered man who has taught one morality in an immoral act, according to his teachings, a Victorian matter...
...Even when his observations about a work are strongly favorable, he appears to feel compelled to reach for the negative—often with curious results...
...Los Angeles Carl A. Auerbach Professor of Law University of California Elliot Zupnick replies: Given the low savings rate, there can be little question that an attempt by the United States government to finance its deficits by competing for loanable funds on the open market would drive up interest rates and ultimately crowd out private sector investments...
Vol. 67 • April 1984 • No. 8
